The Dealmakers Forum E-Newsletter, July 10, 2013 – International Seniors Housing Development, Formation Capital Made its Largest Investment in the Seniors Housing Business, Development is Definitely Picking up Steam

Bringing You Senior Care M&A Deals and News

July 10, 2013 Issue:

Seniors Housing Weekly Update: 60 Seconds with Steve Monroe International Seniors Housing Development. The world awaits U.S. seniors housing developers, but the process is not always as easy as it may seem… Read More

Recent Senior Care M&A Deals

Long-Term Care

Acquirer

Target

Price

HealthLease Properties REIT

12 Senior Housing and Care Portfolios

$190.6 million

The Ensign Group, Inc.

Mountain View Rehabilitation and Care Center

N/A

Deal of the Week Formation Capital made its largest investment in the seniors housing business, a $400 million acquisition of 36 properties in 10 states, valued at about $150,000 per unit. The seller was not disclosed, but we assume it was Lone Star divesting 75% of its 2009 purchase of 45 properties from the former Sunwest Management. GE Capital Healthcare Finance Services and Capital One Bank provided the mortgage financing, which is a five-year floater. Financial details have not been disclosed, but we have estimated that EBITDA is between $30 million and $32 million, which results in a 7.75% cap rate. About 66% of the units are assisted living, with 18% independent living and 16% memory care….. Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

Financing of the Week In addition to financing the Formation Capital acquisition above, Capital One Bank was the lead bank for a $48 million, five-year term loan that will be used to refinance existing debt as well as the construction of additional units at Sagewood, a new community in Phoenix, Arizona that is owned by the joint venture between Life Care Services and The Westminster Funds. The community already has 278 independent living units, which include 16 villas and 24 “casitas,” and a health center with 38 skilled nursing beds and 10 assisted living suites. The new construction will include 14 additional casitas and a second dining venue. It looks like the LCS/Westminster Partnership is alive and well, and expanding…….Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

Stat of the Week Development is definitely picking up steam, but it appears that the majority of it is in the assisted living segment, and within that, there are a lot of memory care and Alzheimer’s communities being built. From 2007 through 2010, those assisted living properties that were either all memory care/Alzheimer’s, or had a memory care component, sold for higher per-unit prices than did traditional assisted living without these services. In 2010, for example, those memory care properties sold on average for almost double what traditional assisted living buildings commanded in the market. This changed in 2011, and by 2012, with an abundance of high-end traditional assisted living on the market, memory care/Alzheimer’s facilities sold for an average price of about $155,400 per unit, compared with $169,300 per unit for traditional AL. Unless we start to experience some pockets of overbuilding of these specialized assisted living communities, we expect the memory care/Alzheimer’s valuations to rise again since the demand for these services still seems to outweigh the supply, and the demand will grow at a faster pace for the foreseeable future……Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

Stock of the Week It has not been one of the better stock performers over the years, mostly because of its identity crisis as it traverses between assisted living and skilled nursing, with a little rehab hospital side business, but Five Star Quality Care has jumped nearly 20% in price since late June. Its major landlord and capital partner, Senior Housing Properties Trust, just happens to be one of the few health care REITs to have posted an increase in its share price since June 1, so perhaps they are dancing to the same tune now. Five Star is trying to break out above $6.00 per share, a level it has not seen since April 26. If the overall markets continue on their upward trajectory, that may happen soon enough……Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

Beech Street Does Senior Housing the Right Way Few mortgage lenders offer as extensive a selection of seniors housing financing solutions for independent living, assisted living, and skilled nursing communities as Beech Street Capital. And even fewer are capable of executing those solutions with as much competence and certainty. Our seniors housing experts tailor each transaction to meet the needs of our borrowers, drawing on Fannie Mae, Freddie Mac, FHA, and non-agency sources. This unique combination of selection, speed, and service explains why Beech Street has catapulted into the front ranks of Fannie Mae and Freddie Mac, and a rapidly growing HUD business in just three short years. Beech Street has all the flexibility you would expect from a privately owned, entrepreneurial company with the experienced, knowledgeable, and well-connected team to match. Borrowers depend on Beech Street to come up with solutions that really work for them. http://www.beechstcap.com/thank-you-seniors

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